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Experts discuss best approach to youth unemployment

ASHLEY HALL: The Federal Government is looking at shaking up the apprenticeship system, with a pilot system announced today.

Under the new scheme, apprentice electricians would progress through their training on the basis of competency, rather than according to time-served.

It's the latest in a long list of efforts to address both the trade shortage and the problems of youth unemployment.

While Australia's overall unemployment rate sits around 5 per cent, unofficial figures from the University of Newcastle put youth unemployment at about 38 per cent.

And those working in the sector say it's a problem that's likely to get worse as state governments make big cuts to funding.

So what's the key to getting young Australians into work?

To discuss this question, I'm joined in our Sydney studio by Dr Damian Oliver, who's an industrial relations specialist with expertise in youth workforce participation. He's previously worked at the National Centre for Vocational Education Research (NCVER) and from next week, he'll be based at the University of Sydney's Workplace Research Centre as its leading research analyst.

Also in our Melbourne studio, Nicholas Wyman, the chief executive of WPC Group, a not-for-profit group training organisation that finds apprentices for businesses and provides mentoring services.

Nick Wyman, first to you. WPC currently has 650 apprentices in work and yet you say youth unemployment has reached a crisis point. Paint me a picture. Why do you consider it a crisis?

NICK WYMAN: Well, we've got this incredible skills gap going on. We've got this labour market mismatch. If you look at youth unemployment globally and we look to countries like Spain and Greece, you know, you've got youth unemployment sitting around 46, 47 per cent and in inner Western Sydney we've got it here from the Government statistics last month sitting at 50.9 per cent.

So these young people are not in work and are on welfare and this is, you know, we are running out of taxpayers in this country. Business and industry needs to really look at their commitment to ongoing skills training and I think that the economic environment, it is quite frightening.

ASHLEY HALL: Damian Oliver, let's look at the figures. The latest official count shows the number of people starting a trade apprenticeship is in decline, down about 2.5 per cent in the year to March. Although the number of people starting traineeships outside of a trade climbed by nearly 5 per cent. How concerned are you by that figure? What does it tell us?

DAMIAN OLIVER: Well, it is concerning. What we see is that trade apprenticeship commencements moved differently to traineeship commencements and what is concerning about them is that when I looked at this with a former colleague at NCVER we saw that the number of trade apprentice commencements is actually quite a good predictor and indicator of what's likely to happen in the next couple of years because if you think about how trade apprentices work, they are employers in the construction industry, electrical industry, manufacturing, looking at a four year, three or four year commitment.

So if the number of apprentice commencements is actually ticking down slightly then that's actually an indication that employers out there are worried and perhaps need a bit more encouragement from the Government to take on young apprentices.

ASHLEY HALL: So this shows that employers are worried not that unemployed workers are not entering apprenticeships.

DAMIAN OLIVER: Well, unemployed workers can only enter apprenticeships if employers are willing to offer them and that's the key to getting young people into decent jobs.

ASHLEY HALL: You believe youth unemployment is an urgent issue, something that needs action right now. Why is that?

DAMIAN OLIVER: Well, what we see is that when unemployment starts to tick up initially perhaps the unemployment rate might only move up slowly but what's happening is that those people who are already unemployed, stay unemployed for longer and longer and longer so the time it takes to find a job increases and in that time those people whether they are young people looking to move into the workforce for the first time or whether they are older people who perhaps have been laid off, they are experiencing skills wastage. They are also experiencing a loss of self esteem and confidence and that makes it more and more difficult to get back into the workforce.

When times are good that doesn't matter so much because employers will always be looking to take on new people but when times are tough, that's when people are at real risk of getting locked out of the workforce and experiencing what we call job scarring.

ASHLEY HALL: Nicholas Wyman, what these figures don't show is the amount of under-employment. There is around 12 per cent of the population that would rather be working about 15 hours or more extra. How big a concern is this in the area of youth employment?

NICHOLAS WYMAN: Well, if you look at the number of Australians, there is 22 million Australians of which 15 million are of working age and there is over 2.2 million as you point out are unemployed or under-employed with one in seven Australians receiving some form of welfare. We're running out of taxpayers and as Damian points out, if we can't make the transition from young people from school to the world of work, if we can't convince them that things like apprenticeships are actually okay, there is this social status, this stigma that hangs around skill careers and vocational careers.

If we can't convince these young people and we can't actually take away the lure of welfare. At the moment there is many young people that I meet on a daily basis who talk about, they actually talk about their pay and I'm thinking, I'm looking at their CV thinking to myself how can they, what are they talking about, pay, they haven't worked and they consider that their welfare payment, they call it their pay.

So we've got this huge problem where I think young people, many take it because it's there but if we had, we really need to get people focused and employers are willing and able but we also need to look at employers as well and incentivise them as Damian points out.

ASHLEY HALL: So you're saying that contrary to what Damian is suggesting, that it is about whether employers are hiring people, you're saying that what we are getting is workers not prepared to work. Is that right Nicholas?

NICHOLAS WYMAN: Well, my organisation today has 100 apprenticeships on offer and these are with fantastic organisations. They are in the trades, they are traineeships, they are in all sorts of vocations and industries but we've got this record high youth unemployment and our young people won't take the jobs but on the other side of the coin, you've got business and industry who at this time of year should be really looking at taking on entry level workers, sitting on their hands because at state level, we've still got taxes that actually tax employers to take people on. You've got payroll tax so there needs to be more incentives for employers to take on entry level workers and we really need to tighten up on, we really need to tighten up on young people who leave school and see that welfare is actually okay.

ASHLEY HALL: Damian Oliver?

DAMIAN OLIVER: Yeah, I'm just wondering with your experience taking on, looking for new apprentices, what do you look for in a young person who wants to do an apprentice? Are they likely to have finished Year 12, have they participated in other types of pre-voc (pre-vocational) or pre- apprenticeship programs?

NICHOLAS WYMAN: We're the employer and so we, as an organisation take the employment risk and we look for one thing and that's attitude. It doesn't matter what a person's background is, it doesn't matter what a person's educational levels are, that all this can be taught through an apprenticeship on the job and there is no shortage of government assistance now available for people who have challenges with literacy, numeracy, whatever the challenges are there are packages and program to be able to assist that and I think if you talk to business and industry and said what are you looking for at an entry level worker, they just want someone who shows up and is interested and I think pretty much everything else can be taught.

ASHLEY HALL: So how do we end with a mismatch then if all you're looking for is someone keen? Are you saying that there is no one keen?

NICHOLAS WYMAN: I'm saying that there is, there is barriers for people to take on entry level positions. If we look at of these 100 positions, 50 of them are in the automotive industry and the pay that an automotive first year apprentice receives is actually equal to what a young person would receive on Newstart with a couple of the things that go on the side if they've got living away from home allowance and we get young people who we get to the stage that we say, this employer would like to take you on, here's a great opportunity and there's all these barriers even apart from financial. They might be in some sort of housing assistance queue and if they take the punt to take the job, they actually fall out of the queue so there is all these disincentives for people to actually join the workforce and that's why I look towards you know countries like the Netherlands. I think it's come out over the last couple of years in Australia - one in two apprentices fail on average, whereas in The Netherlands and Germany you've got completion rates in the 80, 90 per cent and one of the reasons in The Netherlands is because they have mandatory work and study.

You can't just leave school and go straight on to the public, onto the public welfare system.

ASHLEY HALL: Damian Oliver, the main complaint that I hear from apprentices is about the wage. It is low, it is, as Nick says, similar to what's being offered for unemployment. Unless you are living at home, it is very difficult to live on that wage. What is the answer? Many economists argue to get young people in work we need to lower the wage for young workers. What is the answer though?

DAMIAN OLIVER: I think even those economists who are saying that the general level of youth wages are too high would agree that that shouldn't extend to apprentice wages. With the structure of apprentice wages at the moment, because they're based on the proportion of the full tradesperson rate, you often start out at around 50 per cent. As Nicholas said, it can be less than Newstart.

One of the things that's interesting is nobody pays you to go to university or you might be eligible for Youth Allowance but you don't study at university for the money then and there. You study because you know that there is a long term pay off and that's similar to what some of the researchers found with apprentice wages as well.

Where apprentices know that there is a good pay off for completing an apprenticeship and becoming a fully qualified tradesperson, completion rates tend to be a bit higher and so that's why if you look at something like the electrical trades where completion wages are quite high, you get comparatively high completion rates.

If you look at a trade like hairdressing, where even when you are a fully qualified hairdresser, the wage isn't necessarily very high, that's a disincentive.

So, encouraging young people to adopt a longer term view I think is one part of the, one part of the solution. Looking at the status of apprenticeships and really trying to restore that as best you can could go some way to addressing some of those issues.

ASHLEY HALL: There was an expert panel assembled by the Federal Government last year to look at updating the apprenticeship scheme and we won't have time to run through all of those recommendations today but Nick Wyman, one of them was a recommendation to redirect the incentives paid to employers into structured support services for training in businesses focussing particularly on occupations that have an enduring value to the economy, essentially shifting the money to looking after the staff if you like. Is that happening and how is that going? It sounds quite contrary to what you're suggesting.

NICHOLAS WYMAN: Well, I think with all these things there was 14 recommendations in that report two years ago and there has been some headway in some areas and in others there has been no headway at all and this whole idea, there is no question, this is not about spending more money. This is about taxpayers getting better value for money.

If we looked at for instance there is a tool allowance around for apprentices at the moment of $5,000. The majority of apprentices who are eligible for that tool allowance, under some awards, already receive a tool allowance so there is duplication in the system and you would only need $800 to buy a tool kit in that particular trade so the Government is paying an additional $4,200 to that apprentice, direct debiting into their bank accounts and they don't even know what it's for.

I'm saying that that money should be backend loaded and it should be paid to people when they achieve and I think that Damian makes a great point - an apprenticeship is an opportunity to earn while you learn and it should be viewed as a training wage but there is money that needs to be put and it needs to be put directly into two things.

It needs to be, the Government needs to spend money, or not even money, not even spend money. It needs to look at how it is spending its money on incentivising business and industry to take people on and definitely apprenticeships need to be made more attractive.

ASHLEY HALL: Alright, we unfortunately do need to leave it there but thank you for joining us.

Dr Damian Oliver, an industrial relations specialist with the University of Sydney's Workplace Research Centre in our Sydney studio. And in our Melbourne studio, Nicholas Wyman, the chief executive of WPC Group, a not-for-profit group-training organisation that finds apprentices for businesses and provides mentoring services.